Bank of America 2004 Annual Report Download - page 128

below, will have a material adverse effect on the consolidated finan-
cial position or liquidity of the Corporation, but may be material to the
Corporation’s operating results for any particular reporting period.
Adelphia Communications Corporation (Adelphia)
Bank of America, N.A. and Banc of America Securities LLC (BAS) are
defendants, among other defendants, in a putative class action and
other civil actions relating to Adelphia. The first of these actions was
filed in June 2002; these actions have been consolidated for pre-trial
purposes in the U.S. District Court for the Southern District of New
York. BAS was a member of seven underwriting syndicates of securi-
ties issued by Adelphia, and Bank of America, N.A. was an agent
and/or lender in connection with five credit facilities in which
Adelphia subsidiaries were borrowers. Fleet National Bank and Fleet
Securities, Inc. (FSI) are also named as defendants in certain of the
actions. FSI was a member of three underwriting syndicates of secu-
rities issued by Adelphia, and Fleet National Bank was a lender in
connection with four credit facilities in which Adelphia subsidiaries
were borrowers. The complaints allege claims under the Securities
Act of 1933, the Securities Exchange Act of 1934 and various state
law theories. The complaints seek damages of unspecified amounts.
Bank of America, N.A., BAS, Fleet National Bank and FSI have moved
to dismiss all claims asserted against them, with the exception of
certain claims brought under Sections 11 and 12 of the Securities
Act of 1933. That motion is pending.
Bank of America, N.A., BAS, Fleet National Bank and FSI are also
defendants in an adversary proceeding pending in the U.S. Bankruptcy
Court for the Southern District of New York. The proceeding is brought
by the Official Committee of Unsecured Creditors on behalf of Adelphia;
however, the bankruptcy court has not yet given the Creditors’
Committee authority to bring this lawsuit. The lawsuit names over 400
defendants and asserts over 50 claims under federal statutes, includ-
ing the Bank Holding Company Act, state common law and various
provisions of the Bankruptcy Code. The Creditors’ Committee seeks
avoidance and recovery of payments, equitable subordination, dis-
allowance and recharacterization of claims and recovery of damages
in an unspecified amount. The Official Committee of Equity Security
Holders has filed a motion seeking to intervene in the adversary
proceeding and to file its own complaint. The proposed complaint is
similar to the Creditors’ Committee complaint, and also asserts
claims under RICO and additional state law theories. Bank of America,
N.A., BAS and FSI have filed objections to the standing of the
Creditors’ and Equity Committees to bring such claims, and have also
filed motions to dismiss. Those motions are pending.
American Express
On November 15, 2004, American Express Travel Related Services
Company (American Express) brought suit in the U.S. District Court for
the Southern District of New York against the Visa and MasterCard
associations, as well as several banks, including Bank of America,
N.A. (USA) and the Corporation. American Express alleges that it has
incurred damages in an unspecified amount by reason of certain
MasterCard and Visa rules that allegedly restricted their member
banks from issuing American Express-branded debit and credit cards.
Motions to dismiss are pending. Enforcement of the MasterCard and
Visa rules was enjoined by the court in United States v. Visa USA, et al.,
in which none of the Corporation or its subsidiaries was a defendant.
Argentine Re-Dollarization
In December 2001, the Argentine Government issued a decree
imposing limitations on the ability of FleetBoston bank customers in
Argentina to withdraw funds from their accounts in Argentine banks
(the corralito). Since the corralito was issued, a large number of cus-
tomers of the FleetBoston Argentine operations (BankBoston
Argentina) have filed complaints in a number of Argentine federal and
provincial courts against BankBoston Argentina seeking to invalidate
the corralito on constitutional grounds and withdraw their funds.
Since 2002, Argentine courts have ordered many of these deposits
to be paid out at original dollar value.
Enron Corporation (Enron)
The Corporation was named as a defendant, along with a number
of other parties, in a putative consolidated class action pending in
the U.S. District Court for the Southern District of Texas filed on
April 8, 2002 entitled Newby v. Enron. The amended complaint
alleges claims against the Corporation and BAS under Sections 11,
12 and 15 of the Securities Act of 1933 related to the role of BAS
as an underwriter of two public offerings of Enron debt and as an
initial purchaser in a private placement of debt issued by an Enron-
affiliated company.
On July 2, 2004, the Corporation reached an agreement to
settle the above litigation. Under the terms of the settlement, which
is subject to court approval, the Corporation will make a payment
of approximately $69 million to the settlement class in Newby v.
Enron. The class consists of all persons who purchased or other-
wise acquired securities issued by Enron during the period from
October 19, 1998 to November 27, 2001. On January 18, 2005,
the lead plaintiff filed a motion seeking preliminary approval of the
settlement, and on February 4, 2005, the court granted preliminary
approval of the settlement and set a hearing date of April 11, 2005
for final approval.
In addition, the Corporation and certain of its affiliates have
been named as defendants or third-party defendants in various indi-
vidual and putative class actions relating to Enron. These actions
were either filed in or have been transferred to the U.S. District Court
of the Southern District of Texas and consolidated or coordinated with
Newby v. Enron. The complaints assert claims under federal securi-
ties laws, state securities laws and/or state common law or statutes,
or for contribution. In nine cases, plaintiffs seek damages or contri-
bution for damages ranging from at least $15,000 to $472 million
from all defendants, including financial institutions, accounting firms,
law firms and numerous individuals. In the remaining cases, the
plaintiffs seek damages in unspecified amounts.
Fleet Specialist
On March 30, 2004, Fleet Specialist and certain other specialist
firms entered into agreements with the SEC and the New York Stock
Exchange (the NYSE) to settle charges that the firms violated certain
federal securities laws and NYSE rules in the course of their spe-
cialist trading activity. The settlement, which involves no admission
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